Wednesday, March 31, 1999 Published at 05:41 GMT 06:41 UK
Business: The Company File
Oil merger fever
BP eyes Arco's Alaskan operations for savings
The oil sector is buzzing with speculation over who is the next big merger candidate following BP Amoco's multi-billion takeover of US oil group Atlantic Richfield.
BP Amoco was itself created by the takeover of Amoco by BP in December last year for £33bn ($57bn).
Topping most people's list of the next firm to be whisked down the aisle, is Texaco, closely followed by Chevron.
"In my view, Texaco will be the first to go, then Chevron soon after, unless they merge as a single company."
Rodney Chase, deputy chief executive of the newest super major, BP Amoco, said: "Chevron and Texaco must be looking at the structure of the industry and wondering how they fit in."
Plunging oil prices
The oil industry has seen profits come under intense pressure over the past year because of the plunging price of crude oil, which fell by a third to about $10 a barrel.
This pressure on profits has sparked mergers aimed at creating economies of scale and cutting costs.
BP Amoco announced it had clinched its multi-billion dollar takeover of the US oil group Atlantic Richfield on Thursday.
Arco is the seventh-largest oil company in the US, while BP is the third-largest in the world and the biggest company on the London stock market.
The new company, to be known as BP Amoco, will be larger than the Anglo-Dutch group Shell which drops to third place in the ranking of global oil companies.
However the merger is still subject to review by competition watchdogs and could run into potential problems with Alaska statutes that limit how much exploration acreage companies and their subsidiaries can control in that state.
Rodney Chase, BP Amoco's deputy chief executive said that after the Arco takeover, the enlarged company will sell off at least 360,000 acres of land leased in Alaska for oil exploration in order to resolve that concern.
He also conceded that regulators may pay close attention to the merged company's control over crude oil supplies to refineries in California and the West Coast.
BP Amoco estimates the merger will create savings of $1bn dollars (£625m) a year by 2001, but will result in the loss of 2,000 jobs.
Most of the job cuts are expected to fall in the United States but 200 or so posts will be lost in the UK, most of them in Guildford.
BP Amoco chief executive Sir John Browne said: "For BP Amoco, the strategic rationale for this deal is the immense potential it offers for future growth."
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